Q1.

What is Insurance:

Insurance is a contract between the insurer and the insured wherein against receipt of certain amount,
called premium, the insurer agrees to make good any financial loss that may be suffered by the
insured, due to the operation of an insured peril on the subject matter of insurance.

Q.2 : Why People Opt for Insurance?

The Life is full of uncertainties.. People opt for insurance purely for the reasons of uncertainties
in life. Insurance gives the insured a kind of peace of mind as he is assured to making up the
loss in the event of such uncertainities in life happen.

Q.3 How does Insurance work?

Insurance is a technique wherein a number of people, who are exposed to similar risk, participate
in the scheme and contribute in the shape of periodic premiums. Such premiums are received by
the insurer who is able to pay out of the premiums received by him, for the losses of some of
those who have participated in the scheme.

Thus it is wonderful technique of spreading and transfer or risks.

Q.4 : What kind of Insurance Are Available in India :

Insurance business is divided into four classes , namely :
1) Life Insurance. Popular Products in Life insurance are Endowment Assurance (Participating), and
Money Back (Participating). More than 80% of the life insurance business is from these products
2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Fire and Miscellaneous insurance
businesses are predominant. Motor Vehicle insurance is compulsory.

Life Insurers transact life insurance business; General Insurers transact the rest i.e. Fire
Insurance, Marine Insurance and Miscellaneous Insurance.

Q. 5 : What are the Primary Legislations for Insurance in India:

In India Insurance is a federal subject. The primary legislations that deals with insurance
business in India are:

Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999.
Q. 6: What are Consumer Protections Available in India :

Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is empowered to redress

customer grievances in respect of insurance contracts on personal lines where the insured amount
is less than Rs. 20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained
from the offices of LIC and other insurers.

(A) LIFE INSURANCE :

 Term Life Insurance

 Permanent Life Insurance

(B) GENERAL INSURANCE

 Fire Insurance
 Marine Insurance
 Accident Insurance

(A)Life Insurance

Life Insurance is a contract providing for payment of a sum of money to the

person assured or, following him to the person entitled to receive the same, on
the happening of a certain event. It is a good method to protect your family
financially, in case of death, by providing funds for the loss of income.

A1. TERM LIFE INSURANCE : Under a Term Life contract, the insurance
company pays a specific lump sum to the designated beneficiary in case of the
death of the insured. These policies are usually for 5, 10, 15, 20 or 30 years.

Term life insurance are the most popular in advance countries but were not so
popular in India. However, after the entry of the private operators and
aggressive marketing by few players this kind of policies are becoming popular.
The premium on such type of policies is comparatively quite low when compared
with other types of life insurance policies, mainly due to the fact that these
policies do not carry cash value.

PLUS OF TERM LIFE INSURANCE MINUSES OF TERM LIFE INSURANCE

 - If one survives the period of the policy, he /
she does not get any money at the end of the
- The premium payable on these policies is policy.
low as they do not carry any cash value.
The premium on such policies keeps on
- One can afford for quite high value increasing with age mainly because the risk
insurance policies of death of older people is more. Over the
page of 60, these policies become difficult to
afford.

A2. PERMANENT LIFE INSURANCE :

In a Permanent Life contract, a portion of the money paid as premiums is

invested in a fund that earns interest on a tax-deferred basis. Thus, over a
period of time, this policy will accumulate certain "cash value" which you will be
able to get back either during the period of the policy or at the end of the
policy.

Your need for life insurance can change over a lifetime. At any age, you should
consider your individual circumstances and the standard of living you wish to
maintain for your dependents. In most cases, you need life insurance only if
someone depends on you for support. Your life insurance premium is based on
the type of insurance you buy, the amount you buy and your chance of death
while the policy is in effect. This type of policy not only provides protection for
your dependents by paying a death benefit to your designated beneficiary upon
your death, but it also allows you to use some part of the money while you are
alive or at the end of the policy. Some examples of such policies are :- Whole
Life, Universal Life and Variable-Universal Life.

ENDOWMENT POLICIES
These policies provide for period payment of premiums and a lump sum amount
either in the event of death of the insured or on the date of expiry of the policy,
whichever occurs earlier.
MONEY BACK POLICIES
These policies provide for periodic payments of partial survival benefits during the
term of the policy itself. A unique feature associated with this type of policies is
that in the event of death of the insured during the policy term, the designated
beneficiary will get the full sum assured without deducting any of the survival
benefit amounts, which have already been paid as money-back components.
Moreover, the bonus on such policies is also calculated on the full sum assured.
ANNUITY / PENSION POLICIES / FUNDS
This policies / funds require the insured to pay the premium as a single lump sum
or through installments paid over a certain number of years. The insured in
return will receive back a specific sum periodically from a specified date onwards
(the returns can can be monthly, half yearly or annually), either for life or for a
fixed number of years. In case of the death of the insured, or after the fixed
annuity period expires for annuity payments, the invested annuity fund is
refunded, usually with some additional amounts as per the terms of the policy.
Annuities / Pension funds are different from from all other forms of life insurance
as an annuity policy / fund does not provide any life insurance cover but merely
offers a guaranteed income either for life or a certain period. Therefore, this type
of insurance is taken so as to get income after the retirement.

Till 01.04.2000, Insurance industry in India comprised mainly of only two state insurers
namely :-

Life Insurers:

 Life Insurance Corporation of India (LIC)

General Insurers:

 General Insurance Corporation of India (GIC) (with effect from December, 2000, it has been
made a National Reinsurer)

GIC had four subsidary companies, namely :-

1. The Oriental Insurance Company Limited

2. The New India Assurance Company Limited,
3. National Insurance Company Limited
 4. United India Insurance Company Limited.

(However, with effect from Dec'2000, these subsidiaries have been de-linked from the parent company
and made as independent insurance companies).